Purchasing and procurement is a vast landscape involving multitudes of processes and operations. An entire glossary of terms represents this overwhelming number of processes, functions, and operations.
In this 3-part series, we will try to cover some of the most latest, relevant, and significant purchase and procurement terms that every supply chain and sourcing team should be aware of.
Independent Demand Items
Items whose demand doesn’t depend on other items are categorized as “Independent Demand.” Usually, finished products manufactured for consumer sale are independent demand items.
Landed cost accounts for the cost of a product, including all its logistical expenses. The landed cost of a batch of a product will include its price tag, transportation, handling, and warehousing expenses.
Lean manufacturing is a philosophy that entails efficiency optimization by simultaneously reducing material, time, and monetary consumptions. Well-organized procurement lies at the center of lean manufacturing.
In sustainable procurement and manufacturing environment, life cycle assessment tracks the environmental impact of each phase in a product’s life. From the sourcing of raw material to final packaging and then maintenances throughout its operating life, a product is eco-analyzed through and through.
Long Tail Spend
This represents the sum of all the expenditures that might involve procurement but whose management is not under the procurement department.
Linear pricing represents the items whose unit price doesn’t fluctuate with the ordered quantity. In other words, no discounts can be leveraged on bulk orders when an item is priced linearly. In contrast, non-linear pricing entails price changes with the quantity ordered.